Shared-offices company WeWork, which arguably mainstreamed the space as a service (SPaaS) model, has filed for chapter 11 bankruptcy in a federal court in New Jersey, a statement from the company reads.
In a post to its Newsroom page WeWork says its coworking properties “remain open and operational and the company will continue to provide its signature member experience”. That positive spin is characteristic of the whole update, which calls the reorganisation “strategic action to significantly strengthen balance sheet and further streamline real estate footprint”. Sjoe, that’s heavy lifting in the PR department.
This plan, it says, has “strong support from key financial stakeholders”, one of which is presumably Japanese technology group SoftBank, which owns about 60% of WeWork and has injected billions into it over the years.
According to the Financial Times, WeWork wants out of 69 leases as part of rationalisation it deems “critical” to the restructuring. It also includes the detail that WeWork is in “active negotiation” on improving the leasing terms with more than 400 landlords.
WeWork’s struggles are not new, and it feels like it has lurched from disaster to disaster since about 2019 when its initial public offering (IPO) imploded, controversial CEO and founder Adam Neumann was ousted and about 2,400 employees were laid off. If it is hoping to turn things around from there, 2020 was a real kick in the teeth (more below).
Still, it has really plumbed new lows in 2023. The Guardian offers this alarming summary, which makes the point crystal clear: “The beleaguered company, once valued at $47bn on the private market, endured a 98% decline in its share price this year, leaving it with a market capitalisation of less than $50m.”
Independently owned
WeWork has been flagging the need for drastic action for months, issuing a statement in August that its almost $3bn in long-term debt and $13bn in long-term leases made continued operations on those terms unfeasible — so I guess we’ve hit the feasibility threshold.
The executives of WeWork SA, Andrew Robinson and Stefano Migliore, sent out a media statement on Tuesday to reassure local clients and partners, writing: [we] “affirm that WeWork SA is 100% independently owned by SiSebenza and operates independently from WeWork in the US and Canada”. They emphasise that this strategic reorganisation process “will have no impact on WeWork SA’s operations and stakeholders”.
A spokesperson confirmed that African real estate investor SiSebenza “owns WeWork SA (Pty) Ltd, which is a franchised operator of WeWork for SA, Mauritius, Kenya, Nigeria and Ghana”.
WeWork SA had planned to welcome guests to its newly expanded location in Strand Street, Cape Town, on Tuesday evening — an event that is postponed for now, not to get lost in the talk of the US and Canada business’ struggles.
WeWork SA says it anticipates serviced flexi-office spaces to grow as a proportion of the overall commercial real estate market to 4%-6% in SA and 2% in Africa by 2028.
As I’ve said in the past, there is no doubt that WeWork was innovative. It put coworking on the map, helping many freelancers and small and medium businesses worldwide get access to commercial-grade real estate without commercial-grade budgets. But it is not, as claimed, a technology company.
Still chuckling
This was never more clear than in the annus horribilis four years ago. As part of the attempted NYSE listing, WeWork’s documentation with the Securities & Exchange Commission in the US was the moment most commentators and investors saw behind the proverbial curtain — prompting one of my favourite takedowns by journalist Elizabeth Lopatto of The Verge, in the article “WeWork isn’t a tech company; it’s a soap opera”.
Lopatto counted 110 instances of the word technology in that now infamous document. “But,” she wrote, “I am having the damnedest time figuring out what the ‘extensive technology infrastructure’ is. Does this just mean Wi-Fi? Is it the neon lights? Is it … lasers?” Those two examples had been listed on WeWork’s blog for their use in lighting and digitally measuring spaces. It’s been years and I’m still chuckling at that. Lopatto’s diatribe is still up, as is my reporting on the doomed IPO.
WeWork eventually listed in 2021, but never quite found its feet again. Trading was halted on Monday due to the rumours and early news reports, which ultimately proved true — leaving me wondering if technology was more instrumental in WeWork’s undoing than its early successes.
Many will say it is too simplistic to lay the blame for WeWork US’ demise at the feet of technology, and I don’t — not entirely. The office exodus due to the Covid-19 pandemic undoubtedly played a significant role as the independents and entrepreneurs who occupied WeWork desks worldwide got comfortable in their homes instead.
But when we all emerged from our shelter-at-home offices, professionals worldwide adopted a way of working that undercuts one of what I see as two of the pillars that coworking is built on.
There remains a need for SPaaS and the convenience of funding your physical footprint out of operating expenditure, rather than capital expenditure, for pay-as-you-go boardrooms and collaborative spaces. Yet, the fight about remote versus hybrid versus return still rages, and it can only do so because telepresence and digital communications tools changed the way we work in irrevocable ways. Zoom and its many contemporaries are not just acceptable but de rigueur.
Teams, Zoom, Google Meet, Cisco Webex … Whatever your preferred platform, instant digital communication capability is one of the few “game-changer” technologies that genuinely changed the game.
• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.
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